Category: Accounting Profession Issues and Trends

Shame About Standards

Text of an article published in Accountancy International (August 1999)

August 1999

IFAC is responding to commentator's increasing calls for the profession to "put its money where its mouth is"

The International Federation of Accountants is currently going through the process of organisational and structural self-review so beloved of representative or similar bodies. The report of the special task force set up to undertake that review is now before its council. Changes to IFAC's constitution, to reflect council's response to that report, are expected to go for approval to the next IFAC assembly, when representatives of its 140 or so member bodies meet in Edinburgh next May.

All sounds pretty orthodox? Even a bit turgid? Well, yes and no. Yes, because the political minutiae of who elects whom, or who can sit on what committee, or even, I suppose, the extent to which the large body piper payers call the policy and programme tune, is not the stuff to rivet the attention of your average accountant over his Monday morning cornflakes.

And yet the dry proposals about assemblies and councils, about officers and committees reflect, but maybe overshadow, some pretty fundamental views on future change - change that might, just might, cause a pause in the cornflake munching.

For the proposals on an organisational structure for a body such as IFAC must be based on a view of just what that body is going to be doing in the years ahead. And that view, in turn, is going to depend on some judgement on the political, business and professional environment it will operate in, and on the consequent demands and pressures it will be subject to. Already there is a strong and widespread view that these demands will be insistent enough to exert real pressure on IFAC and on its member bodies - pressure that could lead to significant changes in IFAC and in what it does. Such changes could in fact reach down to the individual accountant, be he or she in Europe, Asia, Africa or the Americas.

For many years, the various accountancy bodies around the world have worked together, through IFAC, to set standards that can apply internationally. These are not just the well-known International Accounting Standards, for which IFAC's sister body IASC has long been responsible, but standards that apply right across the broad span of professional life. They cover auditing, ethics, professional education, public sector accounting and much more. A cursory look at IFAC's Handbook(s) will show the vigour, extent and successful results of this work. It is an impressive accumulation of international professional know-how - or perhaps, more accurately, of know-what's-needed.

Standard-setting isn't enough

But the early warning antennae are already picking up strong signals that this is not enough. The incoming messages are increasingly demanding more. They claim that, if the profession is to maintain its reputation and respect internationally, it must refocus its efforts. In the future, they say, it must move, from developing further and more refined standards, heavily into the area of standards compliance. Significant voices, including in particular voices in international capital raising and lending, are already saying that standard-setting by itself is not enough.

Pressure is therefore mounting for IFAC to move progressively into the field of standards compliance. Most commentators accept that the profession, acting internationally, can never specifically enforce standards. That clearly must be a matter for national professions and regulators. But increasingly they ask the profession to 'put its money where its mouth is'. They point out that IFAC, with the stature and status of the international profession behind it, could demonstrate its independence and integrity and its commitment to standards. They envisage IFAC undertaking and publishing objective and definitive surveys on just how good the various countries and their national professions are in the area of standard compliance. Indeed one such commentator has foreseen an IFAC in which national professions, and their IFAC member accountancy bodies, are divided publicly into three categories: those complying satisfactorily, those progressing steadily towards satisfactory compliance - and the others...

Strength of character

How the profession, and in turn IFAC, will respond to such pressures and demands is a question lying well in the future. But an international body that could successfully undertake the type of compliance survey functions suggested would require not only extensive technical expertise and competence, but also strength of character, integrity and gritty political will. It would need to be strong, well founded and independent in operations and voice. It would need an organisation and structure that would demonstrably secure and underpin that independence and strength.

Poor scores in such compliance league tables could have profound effects. They could affect national economies as well as the national professions. External trust in locally prepared or audited financial statements would quickly diminish, hindering the external raising of capital and impairing the capacity to borrow. In a climate of more liberalised professional work, practices in low-scoring countries could rapidly lose out, particularly on internationally related work. Serious quality issues would arise for the international firms with local national practices.

What accountant, too, would like to read in his morning paper that his national profession had low standards, and that his qualification was judged well below par? How would you like to read that the professional body to which you proudly belong is, in international terms, just hanging on?

Now that could really put you off your breakfast!

Roger Hussey acted as secretary to IFAC's structure and organisation task force, which reported recently to its council. He served for over 20 years as chief executive of the Irish Institute, retiring in 1995.

This article first appeared in the August 1999 "Accountancy International" journal.